‘Superfusion’: Is China trouncing
America in the race to 2030?

          Posted: Sunday, October 4, 2009

"Imagine there's no countries ... it isn't hard to do ..."     —John Lennon, 1971

The United States has experienced two famous bubbles this decade.

Zachary Karabell sees another one that's about 60 years in the making: the idea that America alone calls the shots in the global economy.

Karabell, in his book Superfusion: How China and America became one economy and why the world's prosperity depends on it, doesn't aim to burst this bubble, only neatly deflate it. His goal seems not so much to diminish American expectations, but refocus them. Embrace a global free market with China (and perhaps others) as partner and enjoy the massive benefits for everyone. Or shun reality and go the way of post-World War II Great Britain.

This would lead to a vision Karabell articulates not only in this book but in a recent article about IBM in Newsweek. Nationalism disrupts efficiency and will diminish, superseded by corporations serving a global marketplace at the highest efficiencies, unhindered by trading restrictions. Boundaries will blur or disappear. Firms will be American (or Chinese or other) in name only. The people of the world will be better served, and certain dangerously overinflated national egos that impede global progress will assume more realistic proportions. Here is a core sentence of Superfusion, in Chapter 2: "National economies are becoming units in a global system of hundreds of economies and subeconomies colliding against one another and interacting with one another like so many atoms in a reactor."

This is provocative material. American resistance would come from both right and left. Conservatives would reject certain alliances and liberals would be very suspicious of a potential corporation-driven world, where more decisions would presumably be made not by the people's representatives but unelected board members and capitalists.

Karabell could stand to make this case more aggressively.

His first chapter, "Black Cat, White Cat," is a decent description of recent Chinese history but would be more effective with a thorough 20th century chronology. Basic facts are useful, and stating them is not an insult to China experts who no doubt will be reading this work. There are interesting details on Deng's changing priorities but little explanation as to how this modern power happened to be North Korea Sr. for so long. The second chapter seems the least desirable, a recap of certain highlights of the American 1990s that includes certain cumbersome summaries of the World Wide Web that many of Karabell's readers likely have already struggled through in The World is Flat. By the third paragraph, one is wondering, What is the argument here?

The most alarming scenario Karabell paints is a comparison of the present United States of America to 1940s Great Britain. Karabell writes, "It is certainly possible that well before (2030), the United States will find that its need for foreign capital is so great that it will be forced to abide by conditions that it will find as onerous and humiliating as the British did in 1946. ... That could place China in the enviable position of being able to dictate conditions, and those conditions are likely to suit China's sense of how the world should be rather than America's." Theories are much like real estate; location matters. That these warnings are put off until the end of the book is a sign Karabell does not give them a great statistical likelihood of proving correct.

Karabell's educational resume is off the charts. His writing style in Superfusion is best described as "measured." That would not be a negative in academic or technical circles. In Superfusion, he overloads on the descriptions and underwhelms on the arguments. Paragraph after paragraph is relentlessly filled with qualifiers. The sourcing is impeccable, as is his respect for China skeptics. This gives the book unimpeachable credibility, but a certain dryness and deliberative nature that requires the reader to spend more time processing sentences than ideas.

Sometimes it's useful with nonfiction material to read the back pages first, often labeled "Acknowledgments," where the author very personally describes the project and thanks those who assisted. Almost by definition it is written after the rest of the book is complete, and because of the personal nature, tends to be the simplest, warmest writing in the book, an author "unplugged."

Karabell indeed very graciously credits those who helped him. But on the last page, there is this sentence: "While I see that hybrid as more multifaceted and lasting than he may, he was among the earliest to identify that the interaction between the two was not a run-of-the-mill close relationship between the two countries." Probably not a sentence for the jacket ... and a strong indication this is a writer of serious nuance.

Throughout the book, he tends to rely on important words that unfortunately daze even educated readers. These are words such as "transformative," "cultural," "hegemony," "infrastructure," "commercialization," "substantial," "autonomy," "communications," "significant," "technology," "production," "economic," "decentralized," "transformation," "normalization." These are words that on a broad level are extremely important but on an anecdotal level almost cease to mean anything.

Also, he shuns blunt declarations. Numerous sentences are massaged with clauses such as "for the most part," "to some extent," "overly," "in many respects," "in fact," "for instance," "for example," "of course." In Chapter 5, "Up, Up and Away," on Page 101, Karabell writes of FedEx and qualifies three sentences in a span of seven with "however."

Allowing so many qualifiers is questionable but perhaps merited. Redundancy is a bigger problem. Rampant repetition suggests tighter editing is in order. This is frustrating enough to the reader that several examples are worth mentioning:

Consider in Chapter 1, "Black Cat, White Cat," how the extra words (in bold ital here) completely bog down a simple point: "Cities with burgeoning populations had to spend increasingly large sums of money on new infrastructure, which included roads, water and sewage systems, buildings, public transportation, bridges and tunnels, power plants and power grids, and then the whole gamut of consumer infrastructure such as shopping centers, schools and homes."

In Chapter 2, "The New Economy and the Not-So-New Economy," there are lesser but frequent instances that could've been removed in the editing, such as "The birth of the Web led to a substantial increase in the volume of trades on the exchanges" and "In railing against the formation of NAFTA ..." Karabell on Page 49 discusses Ross Perot's anti-NAFTA campaign in 1992 and his 1996 encore, then repeats those details on Page 115 in Chapter 6.

In Chapter 3, "So Good, You Suck Your Fingers," Karabell writes, "Tianjin falls into the category of a major Chinese city that most people outside of China have never heard of." There is this sentence on Page 75, "Food is food, certainly, and it's not as if KFC represented some groundbreaking experiment in cuisine."

In Chapter 4, "Avon Comes Calling," he writes on Page 82, "other cosmetics companies had followed Avon and were aggressively jockeying for position." Just two pages later, he notes, "Avon was only one of several foreign firms jockeying for position in the Chinese cosmetics market."

Also in that chapter is an apparent discrepancy. On Page 78 he writes of Avon's interest in operating in Beijing, but the "direct selling model alarmed and confused them ... As a result, Avon turned its focus south to the special economic zones of the Pearl River Delta." But then just two pages later he suggests the same was true down south: "the initial reaction to Avon when it began working with local officials on licenses and hiring was incredulity and confusion. Chinese officials wanted to know what direct selling was and why it was a viable business model."

In Chapter 5, there is the dreaded "free of cost."

Karabell offers three critical reasons why America needs China. One is that many of the world's biggest corporations are seeing their only significant growth in China. Another is that China's willingness to buy American debt prevented a catastrophe in the Wall Street crash of 2008. Finally, he refers to the economics principle of comparative advantage, that the world's products will be more accessible for all if trade restrictions are minimal and allow manufacturing to go wherever it wants. The second of those points is likely most debatable among scholars (this writer is not one).

U.S. concerns about Chinese economics can be split into two camps. One is that China is poor and cheap, bent on swiping most of America's manufacturing jobs. The other is that China is a raging consumer of oil, copper, iron ore, aluminum and other resources, bent on commandeering the world's precious supplies of raw materials for economic or military supremacy.

Both theories, despite elements of paranoia, have a small amount of merit. The latter seems more relevant. Karabell is more interested in the former. His argument is for the anti-globalization crowd, a mostly unorganized coalition of leftists, arch-conservatives and others that sees jobs shipped offshore, environmental concerns bludgeoned, power consolidated in corporations, union workers under siege, national security or even sovereignty at risk.

There are at least a few reasons why those fears have abated in the national consciousness. One is that similar sentiments were previously expressed toward Japan (1980s) and Mexico (1990s) only to be largely unfulfilled. Another is that the annual headline-making arguments in Congress about most-favored-nation trading status disappeared with China's arrival in the WTO in 2001. Another is Wal-Mart's success, as Karabell notes, in transitioning from "made in USA" slogans to embracing and selling China-produced goods. Another is the remarkably low U.S. jobless rates (4.4% in 2006) in the middle part of this decade. Still another is that to many people, India is a greater outsourcing annoyance to Americans, whose calls to corporate service centers go to Mumbai, not Beijing.

In Chapter 11, Karabell quotes Clyde Prestowitz of the Economic Strategy Institute on why trade deficits can be exaggerated. "Much of our deficit with China is the transfer of previous deficits with Korea and Taiwan. Most of what China sends to us we stopped making back in the 1970s and 1980s," Prestowitz says.

Nevertheless, Karabell believes the U.S. either has not adequately accepted China or might still choose to shut the openings that exist. A greater curiosity is whether the world's resources can support not only the existing structure but a fully modernized China. Will oil return to $150 a barrel, permanently, maybe higher? Would state-backed Chinese companies be allowed to scoop up some of the world's massive purveyors of raw materials such as Alcoa, Freeport McMoRan, BHP Billiton? Karabell, who regularly opines in op-ed articles for leading financial publications, addressed this topic briefly in The New Republic. His conclusion there, and in Superfusion, is that resource companies do have the capacity to serve China's growth but underestimated it in the 1990s.

This book is receptive to China, but not an apologist for it. Whether Karabell gives modern China a slightly greater benefit of the doubt than some on issues of human rights and enlightenment, or whether he believes those issues are simply dwarfed by the economic stakes, is unclear. Will Superfusion be sold in China? This review was unable to determine that. This was a country that considered The Carpenters subversive until recently (and maybe still does). There are repeated references to Deng's post-1989 vision but not many reminders that a billion people were waiting for one person to tell them what to do. Karabell writes of a dinner in China in which a Chinese national who had spent five years abroad argued with an American executive that there was more freedom in China than Singapore because in Beijing, "Unless I stand in Tiananmen Square with a sign saying 'Down with the Government,' I can do what I want and say what I want and no one cares." So ... other than questioning the people who appointed themselves to govern him, he's got freedom. Karabell, in an example of his extremely measured approach, calls the conversation evidence of a "wide fissure" between how Chinese and Americans view the Chinese way of life, and lets it go without comment. Except he closes that paragraph with the American executive's response, " 'That's just stupid,' he said, and changed the subject," a very subtle suggestion the author might find the American viewpoint on this subject closeminded.

Other experts on China — this writer is not one — with differing views are likely to disagree most with the magnitude of Karabell's projections for Chinese growth. Daniel Drezner wrote recently in Newsweek that Karabell represents the "extrapolator" view, analysts who "look at China's recent astonishing growth rates and assume that Beijing will be the geopolitical equivalent of the Energizer Bunny." Karabell maintained throughout the dismal winter of 2008-09 that the global growth story was not broken, that China is for real despite what stock prices and credit markets indicate, and it's only a matter of time before the recovery. This proved richly correct by spring 2009. But at some point, the boom must plateau. At some point, the number of new high-rises in Shanghai has to taper.

One of the strengths of this book and other political science works is that readers will be inclined to think about the world far beyond what's on the pages. What is, really, an economy, or a government policy? ... Both seem like little more than the imperfectly measured results of human behavior, not the causes of it. People in China get out of bed, do things for 16 hours, then go back to bed, just like Americans. The result, after hundreds of years of comparisons, is that Americans produce far more relevant goods and services for Americans — and even Chinese — than Chinese do, and that has not changed in 10 years. Apple and Microsoft and Google are not Beijing companies; Americans don't drive Chinese cars, they get little if any of their medicine from China, they don't watch Chinese movies or television, they don't speak Mandarin, they don't buy their airplanes or earth-moving equipment or cigarettes or alcohol from China. In fact, they don't even read Chinese writers' defense of China's ability to influence the global economy; instead they read the likes of Karabell making those arguments on behalf of the mainland. For the citizens of China, it's just the opposite.

Some outspoken critics of the American service economy such as Peter Schiff suggest irreparable harm because America "doesn't make anything anymore." Not only a false statement, it is a weak argument for China. It seems to an amateur historian that a primary human goal is to produce enough food; once that's accomplished in abundance, people can start caring about other things like Starbucks and iPods and football and Lindsay Lohan and eBay. Not too long ago, Americans far along in this transition were sitting home watching "Three's Company" while a Gang of Four was running amok in China, or being charged with treason, something like that. If the genius for conquering the world is forming low-wage factories that produce $100 DVD players, why isn't that in Mao's red book, or taught in some of the re-education camps?

Until China is creating medicine that Americans and the rest of the world clamor for, or builds weapons that no one else has, or invents a better space shuttle or combine or digital music player or Internet or genetically modified seeds, then it is hard to accept Karabell's argument of impending parity, certainly not purported 1946-British-esque subservience, no matter what the recent trend in growth is. One key sentence in Chapter 9 about branding in China says much: "The most desirable products were made by foreign companies."

Of the book's various business profiles, Avon is the most interesting. KFC and FedEx and Caterpillar merely delivered likable products that hadn't been available before. The Avon example is very telling. This was a troubled U.S. company viewed at best as middle-market. In China, as with KFC, it's a luxury, which is why it was able to semi-reinvent itself and thrive. Karabell does not suggest Avon succeeded because of Beijing's superior business guidance, but merely because the product was popular, suggesting there are many differing layers of consumer expectation between the countries that are not going to be bridged in mere decades, if ever.

While evidently not a big fan of George W. Bush, Karabell zings both parties in complaints about U.S. policy and rhetoric. He writes, "The Obama administration has approached these new realities with equanimity and maturity. That is one positive, and an improvement over what preceded it." But he also laments John Kerry's 2004 campaign line of "Benedict Arnold CEOs," writing, "Every newspaper that carried his remarks ... connected the dots. Jobs were lost, and China was the cause."

This site is very much interested in pundits' description of Alan Greenspan. Karabell labels him "controversial." He describes the Monica Lewinsky scandal as "minutiae." And in a curiously formal choice of words, he refers to the "men and women who flooded the streets of Seattle" in his summary of WTO protests in 1999.

This decade has been a fertile one for commentary taking issue with the American ego. The "with us or against us" sentiments on action against Iraq, and the financial crisis, gave fodder to international critics who contend America is just as much a force for wrong as for good. And then there is Guantanamo ... It's possible Karabell was compelled to write based on similar emotions. But such sentiments run deeper than this decade, and putting this book in such a category would be a reach. In the 1980s there was meddling in Central America. In the 1990s there was U.S. resistance to the Kyoto Protocol, which is even being blamed for Chicago's Olympic defeat in 2009. Karabell is carefully not overtly attacking American spirit or policy. He merely wants to slice the foam off the beer of USA pride and reduce Americans' expectation of, and interest in, excess.

American views toward China might differ sharply by age. Those under 40 have grown up post-Nixon, with the People's Republic seated at the U.N. as the official China. Those who remember earlier decades know a different story, when "red" was a dangerous word, when Korean and Vietnam wars were regularly claiming American lives, when Peking was Peking and the people running it were hard-hearted militants in uniforms, not bureaucrats in suits.

Where are the famous, most successful minds going? Legendary investor Jim Rogers, according to this quote in Wikipedia, now lives in Singapore and believes China is the future: "If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia." But Steve Jobs, Warren Buffett, Bill Gates, Bill Gross, Michael Dell, Steve Schwarzman and Lloyd Blankfein are among the many who haven't yet bailed.

A few passages are head-scratchers. In Chapter 2, Karabell writes, "Within a few years, the New Economy had assumed a central place in the culture, to the point where other issues and concerns were pushed to the periphery of public life." That seems a cloaked way of saying, "we got giddy about e-mail and ignored China." In that chapter he also writes that the New Economy cliches provided a distorted view of reality; "Television shows presented images of 'middle-class' lives that were in fact available only to the affluent." What shows he's talking about aren't clear — "King of Queens," maybe?

This book's existence is evidence of the high degree of demand in America for intellectual material. The Wall Street Journal several years ago in its "Weekend Journal" wrote about adult discussion groups where people far removed from college or academia would regularly gather to talk about current events, a level of discourse not usually available at the office or around the kids. That need for intellectual challenge — or the appearance of it — has fueled a massive cottage industry of, for example, Thomas Friedman books, even if more relevant, timely, mind-expanding material often can be found on Wikipedia. Karabell suggests in one passage he too might be a bit tired of the cliches, "after years of discussion about globalization and 'the world is flat' ... " not everyone is convinced of what's going on.

Karabell's book is perhaps more relevant than he might realize. Superfusion needs some steroids. Ten years ago it would suffice as a serious wake-up call about China; in today's market, it needs a fresh argument, a fresh hook. The book argues for a more welcoming America. But history feels like the most inevitable conclusion is not that America must change, but that China will have to, and as the Communist Party gradually begins to resemble Mexico's PRI, there will be less dictation over a massive population that may well struggle to compete without it. One way or another, the borders are fading.

Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on it (2009)
Featuring: Chimerica, Tiananmen Square, Zhao Ziyang, Wen Jiabao, Deng Xiaoping, Tank Man, Colonel Sanders, Kentucky Fried Chicken, Procter & Gamble, Avon, Nike, General Electric, Siemens, IBM, Barack Obama, Chairman Mao Zedong, Richard Nixon, Henry Kissinger, Zhou Enlai, Ping-Pong, Red Guards, Cultural Revolution, Hong Kong, Macau, Taiwan, Pearl River Delta, Shenzhen, Daqing, Pudong, SOE, Chiang Kai-shek, "Vinegar Joe" Stilwell, Jiang Zemin, Zhu Rongji, WTO, Seattle, Bill Clinton, George H.W. Bush, Alan Greenspan, Slobodan Milosevic, NAFTA, Ross Perot, Madeleine Albright, Joseph Stiglitz, Joseph Schumpeter, Ta-Tung "Tony" Wang, Allan Huston, A.M. Rosenthal, John Cranor, David McConnell, Hicks Waldron, Heublein, R.J. Reynolds, Liang Yungjuan, John Novosad, James Preston, Andrea Jung, Fred Smith, Federal Express, FedEx, Sinotrans, Jawaharlal Nehru, Indira Gandhi, Li Ka-Shing, Jack Welch, Jeff Bezos, Steve Case, GATT, Robert Rubin, Lawrence Summers, Lloyd Bentsen, Wen Ho Lee, Monica Lewinsky, Christopher Cox, Jesse Helms, Ernest Hollings, Xiao Nan, Charlene Barshefsky, Shi Guangsheng, Al Gore, George Bush, Bill and Melinda Gates Foundation, Morgan Stanley, Stephen Roach, Lord James Bryce, Yao Ming, Ren Zhengfei, Huawei, Bob Woodward, Fang Fengdi, Zhang Mingji, Steve Wynn, Sheldon Adelson, Kirk Kerkorian, Stanley Ho, John Kerry, Benedict Arnold, Liu Xiang, Phil Knight, Richard Pombo, Ron Wyden, John Snow, Byron Dorgan, Charles Schumer, Lindsey Graham, Fu Chengyu, Jeffrey Immelt, Henry Paulson, Wu Yi, Lou Dobbs, Niall Ferguson, Moritz Schularick, Rem Koolhaas, Ralph Nader, Zhao Baoqing, Mia Farrow, Steven Spielberg, Gordon Brown, Angela Merkel, Hillary Clinton, Luiz Inacio Lula da Silva, Manmohan Singh, Fareed Zakaria, Fred Alger, Jardine Fleming, Man Wing Chung, Scobie Ward, Blair Pickerell, Dan Chung, Martin Currie, James Chong, Christina Halpern, Charles Bonello, Scott Moyers, James Pullen, Nicole Alger, David Karabell, Eric Olson, Orville Schell, Minxin Pei, Alice Mayhew, David Rosenthal, Karen Thompson, Roger Labrie, Victoria Meyer, Kelly Lynch, Don Epstein

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